The US Treasury Department has banned Tornado Cash!

The government agency’s Office of Foreign Assets Control added the popular Ethereum blending tool to its sanctions list on Monday. An article on the Treasury website confirms that the protocol’s website and a list of smart contracts associated with the project are now blocked.

In a press release, Treasury Under Secretary for Terrorism and Financial Intelligence Brian E. Nelson said:

“Today, the Treasury is sanctioning Tornado Cash, a virtual currency blender that laundered the proceeds of cybercrimes, including those committed against victims in the United States. Despite public assurances to the contrary, Tornado Cash has repeatedly failed to impose effective controls designed to prevent it from routinely laundering funds on behalf of malicious cyber actors, without taking basic steps to address its risks. Treasury will continue to take aggressive action against blenders that launder virtual currency for criminals and those who assist them.”

Tornado Cash is a popular app that allows Ethereum users to obfuscate transactions to preserve their privacy. It allows users to deposit their assets into smart contracts and then withdraw them from a new address to make their activity on the blockchain harder to track. Tornado Cash has become a mainstay of the Ethereum ecosystem for many users, but it has also gained notoriety due to its popularity with hackers. Whenever a DeFi hack occurs on Ethereum, thieves tend to use Tornado Cash to cover their tracks and make off with the stolen funds. More than $1 billion in illicit funds have been routed through this protocol in the past year, including the record $550 million attack on Axie Infinity’s Ronin Bridge in March.

Tornado Cash caused controversy in the community in April when it announced that it had begun using the Chainalysis oracle to block addresses that had been sanctioned by OFAC. “Maintaining financial privacy is essential to preserving our freedom, however, it should not come at the cost of non-compliance“, said Tornado Cash at the time, raising questions about its degree of decentralization.

OFAC has issued several crypto-currency-related sanctions in the past, but this one is unique in that it targets a protocol rather than just a website front. The list of blocked addresses includes the proxy address, 10 ETH deposit agreement, 100 ETH deposit agreement, and 100 DAI deposit agreement, among others.